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European retail parks: West & East Europe reach different inflexion points

This asset class continues to evolve across Europe. A steady supply of new space is expected going forward, with 1.45 million sq m of new retail park space scheduled for opening in 2019/2020, according to Cushman & Wakefield.

In Western Europe, where retail park development has reached maturity, Cushman says new schemes have to be innovative and compelling to be successfully developed. Many of the new retail park schemes include leisure and F&B to make them more attractive as retail destinations. By contrast, in Central and Eastern Europe, the market has relative under supply, providing scope for increased levels of retail park development activity.

European retail park floorspace increased by 2.2% in 2018, reaching 50.1 million sq m, according to Cushman data. Overall, 995,000 sq m of new retail park space was completed, 15% less than in 2017.

In its Summer European Retail Parks report, Cushman explains:

“Physical retail is very much alive – but it is undergoing a significant evolution because of the growth in online shopping and the out-of-town market is not immune. However, the retail warehouse market has so far proved resilient, with affordability, flexibility, convenience and accessibility the main attractions for new retail park occupiers and shoppers.

“In Western Europe, development remains focused on large cities with strong catchment areas and high pedestrian flows. In Central and Eastern Europe, development is turning to smaller schemes in smaller cities and suburban areas, in addition to secondary and tertiary locations. This provides an opportunity for small-to-medium sized retail parks with easy access, affordable rents and good quality tenant mix.”

Cushman added that an increasing amount of older stock is now looking dated and will require refurbishment/redevelopment going forward. Many landlords are reviewing their retail park portfolios and identifying opportunities for redevelopment and alternative uses, although these opportunities are currently restricted to the major cities.

In Central and Eastern Europe, the outlook for the retail park market remains positive. Development is turning to smaller schemes in smaller cities and suburban areas, in addition to secondary and tertiary locations. More dominant retail parks are expanding by attracting mass-market fashion retailers.

Retailer expansion in smaller towns is creating opportunities for the development of small and medium schemes, which is boosting opportunities for local developers. The continued growth of online retail sales will have an increasing impact on the out-of-town retail market. However, retail warehousing remains relatively less exposed than other sub-sectors, given the more sustainable rental levels and continued popularity of car-borne shopping.

james.wallace@realassetmedia.com